BoE hints at low rates

City watchers were surprised yesterday by the contents of the latest Monetary Policy Committee meeting on rates, which revealed Bank of England governor Mervyn King was outvoted on his desire to pump a further £75bn in to the economy. They read "Insufficiently stimulatory monetary policy could cause inflation to remain below target, depressing inflation expectations." The revelation means it is extremely unlikely that interest rates will rise significantly for many months.

King and fellow Monetary Policy committee members Tim Besley and David Miles voted to increase quantitative easing by £75bn to £200bn in total, however the other members were only prepared to raise it to £175bn. Some analysts are concerned about this split in the group, warning that it could put the country's recovery in jeopardy.

As investors digested the implications of the minutes the pound suffered renewed weakness against a basket of currencies including the dollar, falling 1.5 cents before staging a recovery. Certainly they indicate the Governor's concerns over the strength of the UK economy amid increasing unemployment and subdued spending patterns.

Previously analysts had expected the Monetary Policy Committee to recommend limiting the quantitative easing programme to its original level of £125bn as the economy emerges from its downturn. Now, however, the odds are stacked in favour of further easing at the next MPC meeting in November.

WHAT ARE THEY SAYING:

Gerard Lyons, chief economist at Standard Chartered Bank, in the Guardian: "The Bank should be congratulated on their practical response to this crisis. There is no way that the Bank of England is going to prematurely tighten policy."

David Blanchflower, an ex-MPC member, in the Daily Telegraph: "Mervyn may change his mind if some really promising statistics come along – say a rise in unemployment – but even those inflation numbers this month weren't a big enough shock to change matters. I think Mervyn will now be there behind the scenes twisting arms like mad. I suspect they will have to do more." ·